Fair Work Act 2009

s.394 - Application for unfair dismissal remedy

Application for an unfair dismissal remedy - jurisdictional objections - whether small business employer- whether related business is an associated entity - whether applicant met minimum employment period.

[1] On 4 October 2018, Mr John Sutton made an application pursuant to s.394 of the Fair Work Act 2009 (the Act) alleging that his dismissal from Solar and Batteries Direct Pty Ltd (Solar) was harsh, unjust or unreasonable. He agrees that he also performed work for Parke Electrical Pty Ltd.

[2] Having obtained ASIC extracts, I am satisfied that Mr Iain Parke is a sole director of Solar, together with the sole director of Parke Electrical Pty Ltd. The Australian Business Register details that the Trustee for THE PARKE FAMILY TRUST (the Trust) is Parke Electrical Pty Ltd.

[3] On 27 February 2017 Mr Sutton commenced working for Mr Parke. He is unsure which entity, either Solar or Parke Electrical Pty Ltd (Parke Electrical) employed him. He was paid only $12 per hour and was not provided with a pay slip.

[4] On 6 July 2017 Mr Sutton received his first payslip in the course of his employment, which described his employer as "Parke Electrical Pty". The ABN on his pay slip is 14 311 828 941, matching the ABN for the Trust. Mr Sutton continued to receive payslips from Parke Electrical until 17 May 2018.

[5] On 9 January 2018 the hourly rate of pay increased to $15 on account of Mr Sutton complaining to Mr Parke about the low rate and other conditions.

[6] On 15 March 2018 Mr Sutton entered into a four year apprenticeship with Solar. Mr Parke completed the apprenticeship contract on behalf of Solar.

[7] Curiously, even after having entered into an apprenticeship with Solar in March 2018, on 17 May 2018, Mr Sutton received a pay slip from Parke Electrical for the period 7 May 2018 to 13 May 2018. The following week, on 23 May 2018 he received a pay slip from Solar for the period 14 May 2018 to 20 May 2018.

[8] Mr Sutton alleges that throughout July 2018 to September 2018 he was not paid correctly for hours worked, or for personal and annual leave taken during that period. For example, he stated that for the period 30 July 2018 - 5 August 2018 he worked 55 hours, but was paid only for 28.83 hours.

[9] Mr Sutton stated that he missed several days of work between 5 September 2018 and 14 September 2018 due to periods of personal and annual leave. He did not receive a text message on 16 September 2018 informing him where he was required to work the next day. There is no evidence before the Commission of Mr Sutton having made appropriate inquiries of his employer.

[10] Mr Sutton stated that on 18 September 2018 he received a text message from Mr Parke which stated, "I take it by not showing up to work and ignoring everyone's phone calls is your way of letting us know you have finished".

[11] Mr Sutton replied by text message, "I was told not to come in last week and then didn't receive anything about working on Monday until the morning. I haven't been getting paid properly while being at TAFE and I haven't even been paid from 2 weeks ago and I didn't receive a reply after asking about that either."

[12] Mr Parke replied by text message, "Let's just call it a day then if that's your attitude". Mr Sutton took Mr Parke's reference to 'call[ing] it a day' to mean that he had been dismissed from his employment.

[13] In the Form F3 completed by Solar on 26 October 2018, Solar raised a jurisdictional objection, nominating that Mr Sutton had not been dismissed by Solar. It was stated that Mr Sutton commenced employment with Solar in June 2017.

[14] In a subsequent Form F4 completed by Solar on 4 December 2018, Solar raised another jurisdictional objection, stating that Mr Sutton did not meet the minimum employment period of 12 months for a small business. Mr Parke also emailed the Commission stating:

"John Sutton was only employed at solar and batteries for 5.5 months and I have checked and for a small employer it has to be a minimum of 1 year before they can peruse (sic) an unfair dismal (sic) case."

[15] He sent further correspondence on the same date:

"I've been filling out the paperwork for the case and noticed the following statement, John started working for solar and batteries on 1st April 2018 and has only worked there for 5.5 months and I come under the small business section. If this is correct how can this be going ahead."

[16] On 14 December 2018, correspondence was sent from Deputy President Dean's chambers seeking further information from the respondent relevant to its jurisdictional objection that Mr Sutton had not met the minimum employment period. Mr Parke responded by email on 16 December 2018 as follows:

"John Sutton commenced working for Solar and batteries Direct 1st April 2018 and finished working 18th September 2018 therefore this does not meet the minimum requirements. The companies are two separate entities. It should also be noted that john was a trainee and this falls out of the scope of unfair dismissal act."

[17] Upon this matter being allocated to me I sent correspondence to the parties through my chambers confirming that my consideration of this matter was limited to a consideration of Solar's jurisdictional objection that Mr Sutton had not completed the applicable minimum period of employment and was not a person protected from unfair dismissal. I informed the parties that this must occur before any consideration of whether there had been a dismissal pursuant to s.386(1) of the Act.

[18] I noted to the parties that Mr Sutton's service with Parke Electrical may count towards his subsequent service with Solar.

[19] I referred the parties to meaning of 'associated entities' under s.50AAA of the Corporations Act 2001 (the Corporations Act) and directed Solar to file material explaining the corporate relationship between Solar and Parke Electrical by 1 February 2019. Solar did not file any material as directed.

[20] On 5 February 2019 I conducted a telephone conference of this matter between the parties. Following the conference I issued directions requiring each party to file further material regarding Solar's jurisdictional objection as to whether Solar and Parke Electrical are 'associated entities'. I foreshadowed to the parties that I would seek their views as to whether my decision regarding whether Mr Sutton was a person protected from unfair dismissal could be made on the papers, or whether a hearing of this matter would be required.

[21] Solar again failed to file material as directed. Mr Sutton filed material in accordance with my directions.

[22] Following receipt of Mr Sutton's material, I sought the parties' views on whether my decision in this matter could be made on the papers, or whether a hearing was required. Mr Sutton advised that he was happy for this matter to be decided on the papers and without a hearing. Solar did not express its view as to whether a hearing was required in this matter.

[23] On 1 March 2019 I wrote to the parties through my chambers and indicated that my decision regarding Solar's jurisdictional objection that Mr Sutton was not a person protected from unfair dismissal would be made on the papers and my decision was reserved.

[24] Whilst not all of the submissions and evidence before me may be referred to in this decision, all of such have been considered.

[25] Section 396 of the Fair Work Act 2009 (the Act) sets out several matters that must be considered before the merits of an application can be considered, and states:

"396 Initial matters to be considered before merits

The FWC must decide the following matters relating to an application for an order under Division 4 before considering the merits of the application:

(a) whether the application was made within the period required in subsection 394(2);

(b) whether the person was protected from unfair dismissal;

(c) whether the dismissal was consistent with the Small Business Fair Dismissal Code;

(d) whether the dismissal was a case of genuine redundancy."

[26] Section 382 of the Act provides for when a person is protected from unfair dismissal, and states:

"382 When a person is protected from unfair dismissal

A person is protected from unfair dismissal at a time if, at that time:

(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and

(ii) an enterprise agreement applies to the person in relation to the employment;

(iii) the sum of the person's annual rate of earnings, and such other amounts (if any) worked out in relation to the person in accordance with the regulations, is less than the high income threshold."

[27] Section 383 of the Act defines the meaning of 'minimum employment period' and states:

(a) if the employer is not a small business employer--6 months ending at the earlier of the following times:

(i) the time when the person is given notice of the dismissal;

(b) if the employer is a small business employer--one year ending at that time."

[28] Section 23 of the Act defines the meaning of "small business employer", and states:

(1) A national system employer is a small business employer at a particular time if the employer employs fewer than 15 employees at that time.

(2) For the purpose of calculating the number of employees employed by the employer at a particular time:

(a) subject to paragraph (b), all employees employed by the employer at that time are to be counted; and

(b) a casual employee is not to be counted unless, at that time, he or she has been employed by the employer on a regular and systematic basis.

(3) For the purpose of calculating the number of employees employed by the employer at a particular time, associated entities are taken to be one entity.

(4) To avoid doubt, in determining whether a national system employer is a small business employer at a particular time in relation to the dismissal of an employee, or termination of an employee's employment, the employees that are to be counted include (subject to paragraph (2)(b)):

(a) the employee who is being dismissed or whose employment is being terminated; and

(b) any other employee of the employer who is also being dismissed or whose employment is also being terminated."

[29] As I noted to the parties, whether Parke Electrical and Solar are 'associated entities' is relevant to the jurisdictional issue before me. That is due to s.22 of the Act, which relevantly provides:

(1) A period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include any period (an excluded period) that does not count as service because of subsection (2).

When service with one employer counts as service with another employer

(5) If there is a transfer of employment (see subsection (7)) in relation to a national system employee:

(a) any period of service of the employee with the first employer counts as service of the employee with the second employer; and

(b) the period between the termination of the employment with the first employer and the start of the employment with the second employer does not break the employee's continuous service with the second employer (taking account of the effect of paragraph (a)), but does not count towards the length of the employee's continuous service with the second employer.

(7) There is a transfer of employment of a national system employee from one national system employer (the first employer) to another national system employer (the second employer) if:

(i) the employee becomes employed by the second employer not more than 3 months after the termination of the employee's employment with the first employer;

(ii) the first employer and the second employer are associated entities when the employee becomes employed by the second employer..."

[30] Section 50AAA of the Corporations Act 2001 (the Corporations Act) sets out the meaning of "associated entities", and states:

(1) One entity (the associate ) is an associated entity of another entity (the principal ) if subsection (2), (3), (4), (5), (6) or (7) is satisfied.

(2) This subsection is satisfied if the associate and the principal are related bodies corporate.

(3) This subsection is satisfied if the principal controls the associate.

(b) the operations, resources or affairs of the principal are material to the associate.

(a) the associate has a qualifying investment (see subsection (8)) in the principal; and

(b) the associate has significant influence over the principal; and

(a) the principal has a qualifying investment (see subsection (8)) in the associate; and

(b) the principal has significant influence over the associate; and

(a) an entity (the third entity) controls both the principal and the associate; and

(b) the operations, resources or affairs of the principal and the associate are both material to the third entity.

(8) For the purposes of this section, one entity (the first entity) has a qualifying investment in another entity (the second entity) if the first entity:

(a) has an asset that is an investment in the second entity; or

(b) has an asset that is the beneficial interest in an investment in the second entity and has control over that asset."

[31] Except in chapter 2E and 8A of the Corporations Act, a reference to an "entity" in the Corporations Act is a reference to "...a natural person, a body corporate (other than an exempt public authority), a partnership or a trust"[1] and for a trust, includes "...a reference to the trustee of the trust."[2]

[32] Section 50AA of the Corporations Act defines the meaning of "control", and states:

(1) For the purposes of this Act, an entity controls a second entity if the first entity has the capacity to determine the outcome of decisions about the second entity's financial and operating policies.

(2) In determining whether the first entity has this capacity:

(a) the practical influence the first entity can exert (rather than the rights it can enforce) is the issue to be considered; and

(b) any practice or pattern of behaviour affecting the second entity's financial or operating policies is to be taken into account (even if it involves a breach of an agreement or a breach of trust).

(3) The first entity does not control the second entity merely because the first entity and a third entity jointly have the capacity to determine the outcome of decisions about the second entity's financial and operating policies.

(a) has the capacity to influence decisions about the second entity's financial and operating policies; and

(b) is under a legal obligation to exercise that capacity for the benefit of someone other than the first entity's members

the first entity is taken not to control the second entity."

[33] Pursuant to s.396 of the Act, Solar's jurisdictional objection that Mr Sutton had not completed the applicable minimum period of employment and was therefore not a person protected from unfair dismissal must be determined before the merits of Mr Sutton's application can be considered, including whether there was a dismissal.

Summary of Mr Sutton's evidence and submissions

[34] Mr Sutton's evidence and submissions in this matter consist of:

• His initial application;

• His submissions as to the merits of his application, filed on 5 December 2018; and

• His submissions in response to Solar's jurisdictional objection, filed on 26 February 2018.

[35] I have had regard to Mr Sutton's submissions regarding the merits of his application only insofar as those submissions deal with matters relevant to the jurisdictional issue before me.

[36] Mr Sutton stated that he commenced employment with Solar on 27 February 2017. Mr Sutton submits that he was initially paid as a labourer but did not receive any payslips until 6 July 2017. Mr Sutton stated that that first payslip was made out from "Parke Electrical Pty" and described him as a "1st year Apprentice", although Mr Sutton was not at that time an apprentice.[3]

[37] Mr Sutton did not produce a copy of his first payslip from Parke Electrical, but did produce a payslip for the period of 7 May 2018 to 13 May 2018. That payslip describes Mr Sutton as a "1st Year Apprentice". The payslip is headed "Parke Electrical Pty" and lists ABN "14 311 828 941".

[38] Mr Sutton stated that on 31 May 2018 he received a payslip made out from "Solar and Batteries", but was not otherwise notified in any way that his employer had changed from Parke Electrical.

[39] Mr Sutton also produced a payslip for the period of 14 May 2018 to 20 May 2018. That payslip describes Mr Sutton as a "1st Year Apprentice". The payslip is headed "Solar and Batteries" and lists ABN "44 607 761 615".

[40] Mr Sutton submits that he was not notified in any way that his employer had changed from Parke Electrical to Solar, other than the receipt of the payslip that described his employer as Solar. Mr Suttons submits that at all times during his employment with both companies the location of the company, uniform, vehicles and all signage was that of Solar.

[41] Mr Sutton stated that on 15 March 2018 he signed an 'Apprenticeship Training Contract' (the contract) to complete a Certificate III in Electrotechnology with Solar. The contract includes information relevant to the jurisdictional issue arising in this matter, as follows:

• Mr Parke signed the contract as the 'employer representative';

• Item 3 of the contract states that Mr Sutton's apprenticeship commenced on 8 January 2018;

• At item 7 of the contract, it is indicated that Mr Sutton is an existing worker;

• Items 28 and 29 of the contract state that the relevant employer for the apprenticeship is "Solar and Batteries Direct Pty Ltd" with ABN "44 607 764 615";

• Item 35 of the contract provides that Mr Sutton will be employed at the workplace of Solar;

• Item 39 of the contract provides that Mr Sutton's apprenticeship is full-time, with 38 hours of working and training per week;

• Item 40 of the contract is particularly relevant, and is set out in full below:

"40 Prior to commencing THIS Apprenticeship/Traineeship, has the apprentice/trainee worked for, or been hosted by/to, the employer/host employer?

[42] Mr Sutton submits that Mr Parke is the sole director of both Parke Electrical and Solar and that Parke Electrical and Solar are therefore related entities pursuant to s.50AAA. Mr Sutton submits that his period of service with Parke Electrical should count towards his total period of employment at the time of his alleged dismissal from Solar on 18 September 2018, and that therefore his period of employment at the time of his alleged dismissal was from 27 February 2017 to 18 September 2018, which exceeds the minimum period of employment provided for in s.383 of the Act regardless of whether Solar is a small business employer.

[43] On 26 October 2018 Solar filed its response to Mr Sutton's application in this matter, raising its jurisdictional objection that Mr Sutton had not been dismissed on 18 September 2018.

[44] Solar's initial response stated that Mr Sutton had commenced employment with Solar during June 2017.[4] Solar's initial response stated that it had four employees as of 18 September 2018,[5] although maintained that Mr Sutton had not been dismissed on that date.[6]

[45] On 4 December 2018 Solar filed a further objection to Mr Sutton's application on the basis that it was a small business employer and Mr Sutton had not completed the relevant minimum period of employment of one year. Solar's objection stated:[7]

"John Sutton commenced work at Solar and Batteries Direct on 1st April 2018 and does not meet the minimum employment period to raise an unfair dismissal case under the small business rule"

[46] As described above, Solar failed on several occasions to file material relevant to its jurisdictional objection as directed by me. As a result, there is little evidence before me in support of Solar's submissions regarding the nature of Mr Sutton's relationship with Parke Electrical and Solar from 27 February 2017 until 18 September 2018.

[47] The only matter that I must determine is whether Mr Sutton was a person protected from unfair dismissal at the time of his alleged dismissal on 18 September 2018, pursuant to s.382 of the Act. If I find that Mr Sutton is not protected from unfair dismissal, his application will be dismissed. If I find that Mr Sutton is protected from unfair dismissal, it will be necessary to convene a hearing relevant to whether there has been a dismissal pursuant to s.386(1) of the Act.

[48] It is not contested that Mr Sutton was employed by both Parke Electrical and Solar at various times. It is not contested that Mr Sutton did not earn more than the applicable high income threshold as of 18 September 2018, which was $145,400. I note also that the contract states that Mr Sutton's employment as an apprentice was covered by the Electrical, Electronic and Communications Contracting Award 2010. The only remaining matter for me to determine is whether Mr Sutton completed the applicable minimum period of employment.

Are Solar and Parke Electrical associated entities?

[49] There is material before the Commission with contested dates as to when Mr Sutton commenced employment with Solar. However, it is uncontested that Mr Sutton completed a period of employment with Parke Electrical prior to his employment with Solar which carried through to his subsequent employment with Solar; there was no break in Mr Sutton's employment with Parke Electrical and his employment with Solar.

[50] If it is the case that Parke Electrical and Solar are associated entities, then it can be said with certainty that following Mr Sutton's employment with Parke Electrical there was a transfer of employment to Solar and his service with Parke Electrical will count towards his employment period for the purposes of s.382 of the Act.

[51] Pursuant to the provisions of the Corporations Act set out above, Solar and Parke Electrical will be associated entities if Mr Parke 'controls' both of those entities.

[52] In Budden v Finke Enterprises Pty Ltd ATF M&L Carlson Family Trust T/A Fused Café Pender Place [2015] FEC 8675, Commissioner Saunders considered whether a sole director of multiple different entities can 'control' those separate entities and found:

"[21] Section 64A of the Corporations Act defines "an entity" to include "a natural person". It follows, in my view, that Mrs Carlson is "an entity (the third entity)" within the meaning of subsection 50AAA(7) of the Corporations Act. My conclusion in this regard is supported by a decision of Judge Riley of the Federal Circuit Court of Australia in Director of the Fair Work Building Industry Inspectorate v Vic Metro Brick and Blocklaying Pty Ltd [2015] FCCA 2266. In that case, Judge Riley held (at [85]) that a natural person who was the sole director and shareholder of two corporations was "an entity [who] controls both the principal and the associate" within the meaning of subsection 50AAA(7) of the Corporations Act."

[53] In Salgras v Fingal Glen Pty Ltd atf the Adelaide Riviera Trust T/A Comfort Hotel Adelaide Riviera [2011] FWA 1401 (Salgras), Commissioner Steel considered a scenario of three different hotels each owned by a separate unit trust and partly managed by an external accounting firm, where each trust shared a single sole director who was also employed by the accounting firm. Commissioner Steel considered that the sole director and another employee of the accounting firm:

"[26] ...are effectively controlling these trusts and trustee companies as employees of [the accounting firm] and the operations, resources or affairs of those entities are material to [the accounting firm].

[27]...[the accounting firm] being a third entity controls the trustee companies being the principals, as [the director], an employee of [the accounting firm] is the sole director of such companies. The unit trusts, the associates are likewise controlled though the trustee companies by [the director]. The operations, resources or affairs of the principal and the associate are both material to the third party."[8]

[54] In MacInnnes v Gladstone CC Pty Ltd T/A Len Smith Carpet Court [2016] FWC 8838, Commissioner Booth considered a scenario where the sole director of the Respondent 'Carpet Court' store was also the sole director of three other 'Carpet Court' stores. Commissioner Booth noted the similarity to Salgras and considered:

"[36] The Corporations Act definition of associated entity includes the control (as defined by s.50AA) by another entity. "Entity" is defined in the s.64A of that Act to include not only other companies but also trusts and individuals. Further 'control' is described in s.50AA(1) as "capacity to determine the outcome of decisions about the second entity's financial and operating policies".

[37] Does then Mr Jack, as sole Director of all 4 companies and other shareholders at the time of termination have the capacity to control the outcome of decisions about entities other than Gladstone CC Pty Ltd?

[38] The notion of control is not restrictive, and extends to, for example a power to veto: Re A Reference to the Federal Court of Australia by the Australian Broadcasting Tribunal Pursuant to Section 22b of the Broadcasting and Television Act 1942 in relation to applications to the Australian Broadcasting Tribunal of Approval [1987] FCA 6, [66] (Full Court, Bowen CJ). Further the test seems not to be limited to operations (for example were decisions of the character ever actually made; did the stores function completely independently), but about the capacity to make such determinations. That capacity will flow from the authority to make determinations rather than historical facts, although past facts might well indicate an actual control, such as joint board meetings.

[39] Here, the entities are owned by the same shareholders and at the time of the dismissal, under the same sole Director, Mr Jack. It is clear that the "capacity to determine the outcome of decisions" about the employer's financial and operating policies was vested in Mr Jack as sole Director and the shareholders. It follows that the other entities are associated entities within the meaning of s.50AAA.

[40] Additionally, the long service letter exhibited by Mr Johnson indicates that Mr Coughlan's claim was paid in full, and while the outcome was apparently the product of negotiation, it is not inconsistent with the position put by the Applicant that the entities were related.

[41] In summary, I am satisfied the 4 corporate entities are associated entities on the basis of the common ownership, directorship, and capacity to control the outcome of decisions. [original emphasis]"

[55] In the present matter and relevant to s.50AAA(7) of the Corporations Act, it must be determined if Mr Parke as a natural person and as the 'third entity' controls both Solar and Parke Electrical. Having considered the test of 'control' set out in s.50AA of the Corporations Act, I determine that Mr Parke has the capacity to determine the outcome of decisions about Solar's and Parke Electrical's financial and operating policies.

[56] I have had regard to the capacity that Mr Parke, as the sole director of each entity can exert over the manner in which Solar and Parke Electrical operate, and the practical influence that Mr Parke can exert as opposed to the rights he can enforce. He is ultimately responsible for both businesses.

[57] I consider that the operations, resources or affairs of both Solar and Parke Electrical are material to Mr Parke, and indeed were material on 18 September 2018, insofar as Mr Parke is responsible for the management of each company.

[58] I find that Parke Electrical and Solar are associated entities.

Was Solar a small business employer as of 18 September 2018?

[59] There is limited information before me as to the employees that make up the Solar and Parke Electrical businesses. In the contract signed by Mr Parke and Mr Sutton on 15 March 2018, the number of employees at Solar is stated as eight. However, Solar submitted in its response to Mr Sutton's application that it had four employees. No material has been filed regarding the number of employees employed at Parke Electrical.

[60] Mr Sutton has not filed evidence or made submissions suggesting that the combined number of employees of Solar and Parke Electrical is 15 or more. With the limited information I have before me, I consider that Solar had less than 15 employees as at 18 September 2018 and was a small business employer for the purposes of the Act. The minimum period of employment that Mr Sutton must have completed is therefore one year.

Did Mr Sutton complete the minimum employment period of one year?

[61] Having found that Parke Electrical and Solar were associated entities throughout the relevant period in this matter and that Mr Sutton's employment with Solar commenced not more than three months after his employment with Parke Electrical ended, I am satisfied that there was a transfer of Mr Sutton's employment from Parke Electrical to Solar pursuant to s.22(7)(a) of the Act and that Mr Sutton's service with Parke Electrical therefore counts towards his period of service with Solar.[9]

[62] Mr Sutton's period of employment with Solar and its associated entity, Parke Electrical exceeded the minimum period of employment of 12 months. As at 18 September 2018 Mr Sutton was a person protected from unfair dismissal.

[63] Solar's jurisdictional objection that Mr Sutton did not complete the minimum period of employment is dismissed.

[64] A notice of listing will be issued, setting a date for a hearing before me to determine if there has been a dismissal pursuant to s.386(1) of the Act.

[1] Corporations Act 2001 (Cth), s.64A(a).

[2] Corporations Act 2001 (Cth), s.64(b).

[3] Submissions of the Applicant, 26 February 2019, p 1.

[4] Form F3 - Employer response to unfair dismissal application, 26 October 2018, Part 1.2.

[5] Ibid, Part 1.7.

[6] Ibid, Part 1.3.

[7] Form F4 - Objection to unfair dismissal application, 4 December 2018, Part 1.2.

[8] Salgras v Fingal Glen Pty Ltd atf the Adelaide Riviera Trust T/A Comfort Hotel Adelaide Riviera [2011] FWA 1401, [26] - [27].

[9] Fair Work Act 2009 (Cth), s.22(5).

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